Breaking news: Democrat Kay Hagan and Republican Bob Corker introduced legislation aimed at creating a covered bond framework today (Wednesday) with bi-partisan support from further Senators.

Co-sponsored by Democrat Chuck Schumer and Republican Mike Crapo, the Hagan-Corker “United States Covered Bond Act of 2011” would create a legislative framework for covered bonds, expanding the funding options for US financial institutions, the Senators said in a statement.

“The US lags behind its global peers in the development of a covered bond market because we lack a legislative framework for issuers and investors,” said Hagan, a member of the Senate Banking Committee. “With a legislative framework in place, US financial institutions will have a powerful tool that can be used to fund loans to small businesses and households.

“This bill would level the playing field for US financial institutions and help strengthen our US economy.”

Corker led a previous Senate covered bond initiative, while Schumer earlier this year said that he could introduce such a bill after seeing Republican Congressman Scott Garrett introduce similar legislation into the House of Representatives. Also called the US Covered Bond Act of 2011, this was passed by the House Financial Services Committee in June.

The passage of Garrett’s bill came in spite of objections from the Federal Deposit Insurance Corporation. It was thought that the FDIC had succeeded in persuading the Senate to leave covered bonds aside, but today’s initiative suggests otherwise.